Tuesday, March 17, 2009
AIG - Enough is Enough
I'm a capitalist at heart - always have been, always will be. However, I must admit this AIG news about bonuses being paid to senior management is disturbing.
Most executives have contracts and thus should get paid as per their agreement(s). Plain and simple. Major league baseball players receive their agreed up upon salaries whether they have a good year or not. However, they certainly don't get paid the incentive related compensation for not reaching certain goals (i.e. RBIs, home runs, playoffs, MVP, etc.). But, bonuses, incentives, stock options, etc. should be issued as a reward for a job well done. If AIG wasn't bailed out by the U.S. Government, the company would be bankrupt.
What's with the bonuses at AIG? The company didn't reach the playoffs. They're lucky the US Government bailed them out. The only losers in this whole scenario is the shareholder and the taxpayer. Something is drastically wrong with this scenario. The Board of Directors should have taken a stand and simply put their foot down and said any bonuses and/or incentive packages for 2008 will not be issued. End of story. No questions asked.
President Obama and NY Attorney General Andrew Cuomo are exploring 'legal avenues' as to how to rescind the bonus money. "The whole concept of a performance bonus is oxymoronic when it comes to AIG," Cuomo said. "It's adding insult to injury. Enough is enough."
In Washington, President Obama has similar sentiments. "This is a corporation that finds itself in financial distress due to recklessness and greed. Under these circumstances, it's hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay, " Obama said.
"How do they justify this outrage to the taxpayers who are keeping the company afloat?" he demanded.
To put things in perspective, here's some stock market history on AIG. The stock traded as high as $70 in 2007. As of March 16, 2009, the stock is trading at $0.83. So, some quick math reveals a 99% decrease in that time frame. Once again, how does this type of performance warrant bonuses?
American capitalism is alive and well; however, AIG is not one of the shining stars.